SUPREME COURT UPHOLDS TRIAL COURT DECISION OF DISMISSAL OF SUIT DUE TO DELAY CAUSED BY THE PLAINTIFFS

 

INTRODUCTION

A two- Judge Bench of the Supreme Court comprising of Justice Vikram Nath and Justice Ahsanuddin Amanullah passed an Order dated 10.01.2024 in Civil Appeal No.8185 Of 2009 in Alagammal and Ors. Vs. Ganesan and Anr and held that the Respondents failed to comply with their obligations within the specified time frame and upheld the Order of the Trial Court.

FACTS

(1) The Appellant No.1, Mr. Alagammal, Appellant No. 2 Mr. Palaniammal and Appellant No. 3 and Mr. Mariammal, entered into a registered Agreement of Sale (hereinafter referred to as the “Agreement”) with the Respondents on 22.11.1990 to sell the Suit property for a consideration of Rs.21,000/-, against which Rs.3000/- had been received in advance.

(2) Further, six months’ time was fixed for the completion of the transaction. As the Respondents had failed to conclude the sale within the said time frame, the Appellants No.1, 2 & 3 forfeited the advance and after 7 years, executed a Sale Deed for the same property with Appellant no. 7 Mr. Thangam, on 05.11.1997 for a consideration of Rs.22,000/-.

(3) On 18.11.1997, the Respondents sent a Notice to the Appellants calling upon them to execute the Agreement. This led to the Respondents filing of Original Suit No.165 of 1998 before the Munsif, District Court, Dindigul against the Appellants for specific performance of the Agreement, damages and for recovery of money with interest.

(4) The Suit stood dismissed by the Ld. Principal District Munsif Judge, Dindigul (“Trial Court”) by Order dated 10.09.2000.

(5) Aggrieved by the Order dated 10.09.2000, the Respondents filed an Appeal bearing S. No.258 of 2008 which was allowed by the First Appellate Court, and the same has been upheld by the High Court of Madras in SA/1127/2008 by the Judgment dated 28.04.2009.

(6) Aggrieved by the Order dated 28.04.2009 of the High Court of Madras, the Appellants filed Civil Appeal No.8185 Of 2009 before the Supreme Court.

SUPREME COURT ANALYSIS

The Supreme Court vide Order dated 10.01.2024, made the following observations:

i) The Apex Court observed that the main question revolved around whether the Agreement dated 22.11.1990 disclosed a fixed time frame for making payments in full by the Respondents, i.e., in terms of the recitals in the Agreement for Sale executed by the Appellant No. 1 in favour of Respondents. The admitted position was that the time indicated in the Agreement was six months from 22.11.1990, i.e., till 21.05.1991 and as per the Legal Notice dated 18.11.1997 sent by the Respondents to the Appellants, only Rs. 7,000/- was paid within the time stipulated.

ii) Further, the Agreement revealed that the Respondents had agreed to pay the Appellants Rs. 21,000/- for the Suit property, out of which Rs. 3,000/- was already paid as earnest money and the rest was to be paid within 6 months.

iii) Moreover, the Respondents were to purchase the stamp papers at their own expense and the Appellants had to register the Sale Deed either in the name of the Respondent No. 1 or as proposed by him before the Sub- Registrar after paying the remaining/balance amount.

iv) That, if the Appellants failed to register the Sale Deed, the Respondents had the right to deposit the sale consideration in the Civil Court and get the sale with possession effected through the Court from the Appellant Nos. 1 to 3.

v) The Supreme Court observed that, within 6 months there existed the onus of paying the entire balance amount of Rs. 18,000/- by the Respondent No. 1 to the Appellant No. 1.

vi) The Apex Court further observed that it was not the case of the Respondents that they had even offered to pay the remaining/balance amount before the expiry of the six-month period. Thus, payment of Rs.3,000/- only out of Rs.21,000/- having been made, or at best Rs.7,000/- out of Rs.21,000/-, which was the amount indicated in the Legal Notice sent by the Respondents to the Appellants, the obvious import would be that the Respondents had not complied with their obligation under the Agreement within the six-month period.

vii) That, the Appellant No.1 having accepted payment of Rs.1,000/- on 21.04.1997 i.e., after Appellant No.1 had executed a Sale Deed in favour of Appellant No.7 on 05.11.1997, coupled with the fact that the forensic expert found the two thumb-impressions purportedly acknowledging payment after the expiry of the time fixed not matching the fingerprints of Appellant No.1 was clearly indicative that time having not been extended, no enforceable right accrued to the Respondents for getting relief under the Specific Relief Act, 1963.

viii) That if the Appellant No.1 had accepted money from Respondent No. 1 after the expiry of the time-limit, which itself has not been conclusively proved during trial or even at the first or second Appellate stages, the remedy available to the Defendants was to seek recovery of such money(ies) paid along with damages or interest to compensate such loss but a suit for specific performance to execute the Sale Deed would not be available, in the prevalent facts and circumstances.

ix) The Division Bench observed that in the present case, there was also no explanation, as to why, an excess amount of Rs.425/-, as claimed, was paid by Respondent No.1 to the Appellant No.1, when the Respondents’ specific stand was that due to the Appellants not being in possession of the property so as to hand over possession to the Respondents, delay was occasioned.

x) That, another important aspect that the Court was expected to consider was the fact that the Appellant No.7 in whose favour there was a Sale Deed with regard to the suit premises, much prior to issuance of any Legal Notice and the institution of the suit in question and that no relief had been sought for cancellation of such Sale Deed, a suit for specific performance for execution of sale deed qua the very same property could not be maintained.

xi) That, the Apex Court relied on the Judgement passed in S. Vidyanadam (1997) 3 SCC 1 which had a similar factual matrix squarely applied in the facts and circumstances of the present case, on the issue that time was the essence of contract and even if time was not the essence of the Agreement, in the event that there was no reference of any existence of any tenant in the building and it was mentioned that within a period of six months, the plaintiffs should purchase the stamp paper and pay the balance consideration whereupon the defendants would execute the Sale Deed, there was not a single letter or notice from the plaintiffs to the defendants calling upon them to the tenant to vacate and get the Sale Deed executed within time. Further, the Legal Notice was issued after two and a half years from expiry of the time period in K.S. Vidyanadam (supra), whereas in the present case, the Legal Notice has been issued after more than six and a half years. The Court in K.S. Vidyanadam (supra) held that;

‘10.It has been consistently held by the courts in India, following certain early English decisions, that in the case of agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. The period of limitation prescribed by the Limitation Act for filing a suit is three years. From these two circumstances, it does not follow that any and every suit for specific performance of the agreement (which does not provide specifically that time is of the essence of the contract) should be decreed provided it is filed within the period of limitation notwithstanding the time-limits stipulated in the agreement for doing one or the other thing by one or the other party.”

However the court also stated that in matters of inaction by the purchasing party to buy, time is of the essence :

In the case before us, it is not mere delay. It is a case of total inaction on the part of the plaintiff for 2 1/2 years in clear violation of the terms of agreement which required him to pay the balance, purchase the stamp papers and then ask for execution of sale deed within six months. Further, the delay is coupled with substantial rise in prices — according to the defendants, three times — between the date of agreement and the date of suit notice. The delay has brought about a situation where it would be inequitable to give the relief of specific performance to the plaintiff.’

xii) The decisions relied upon by the Respondents, relating to the conduct of parties were of no avail to them in the circumstances, as even if the case of later payments by the Respondents to the Appellants was accepted, the same being at great intervals and there being no willingness shown by them to pay the remaining amount or getting the Sale Deed ascribed on necessary stamp paper and giving notice to the Appellants to execute the Sale Deed, it cannot be said that in the present case, judged on the anvil of the conduct of parties, especially the Appellants, time would not remain the essence of the contract.

ORDER

Thus, after considering all the facts and circumstances of this case, the Supreme Court set aside the Order dated 28.04.2009 of the High Court of Madras and the First Appellate Court, and upheld the Order dated 10.09.2000 of the Ld. Principal District Munsif Judge, Dindigul thereby allowing the Appeal of the Appellants.

 

Editors Comments

In property matters Courts have always upheld that if parties have agreed that time is the essence of the contract, they must adhere to the same failing which they would lose their rights to purchase the said property within the agreed time. In many cases, though time is the essence of the contract, if the party that has delayed the payments, makes a payment after the due date and the same is accepted by the seller, it would be deemed that parties did not agree that time was the essence of the contract. In the present case, the purchaser did not adhere to the timelines nor did they take an extension for making the payments, hence it was deemed, that time was the essence of the contract. The court therefore held that, as time was the essence of the contract, the buyer could not demand specific performance of the contract after 7 years of delay.

 

Kartik Khandekar

Associate

The Indian Lawyer

Edited by

Sushila Ram Varma

Chief Consultant and Editor

The Indian Lawyer